Medical Properties Trust, Inc. MPW — also known as MPT — is slated to report third-quarter 2024 earnings results on Nov. 7, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s normalized funds from operations (FFO) per share and revenues is pegged at 20 cents and $241.2 million, respectively.
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The Zacks Consensus Estimate for third-quarter normalized FFO per share has declined two cents to 20 cents over the past two months. The figure implies a year-over-year fall of 47.4%. The Zacks Consensus Estimate for quarterly revenues implies a year-over-year decrease of 21.3%.
For the current year, the Zacks Consensus Estimate for Medical Properties’ normalized FFO per share is pegged at 85 cents, indicating a decline of 46.5% on a year-over-year basis. The consensus mark for 2024 revenues is pegged at $1.01 billion, implying a rise of 15.8% year over year.
Image Source: Zacks Investment Research
Over the trailing four quarters, this Birmingham, AL-based healthcare REIT beat the Zacks Consensus Estimate on three occasions and missed once, with the average surprise being 13.2%. This is depicted in the following chart.
Medical Properties Trust, Inc. Price and EPS Surprise
Medical Properties Trust, Inc. price-eps-surprise | Medical Properties Trust, Inc. Quote
What Our Quantitative Model Predicts for MPW
Our proven model does not conclusively predict a surprise in terms of FFO per share for Medical Properties this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Medical Properties has an Earnings ESP of 0.00% and currently carries a Zacks Rank of 5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Consider for Medical Properties’ Upcoming Q3 Results
A drop in rent billed is likely to have affected the company’s quarterly revenues. The Zacks Consensus Estimate for third-quarter rent billed is pegged at $167.1 million, suggesting a decline from $183.8 million reported in the prior quarter and $229.3 million in the year-ago period. The consensus estimate for income from financing leases stands at $18.4 million, suggesting a fall from $27.6 million reported in the prior quarter and $26.1 million reported in the year-ago quarter.
Also, high interest expenses in an elevated interest rate environment and exposure to certain troubled operators are anticipated to have cast a pall on the company’s quarterly performance.
However, MPT follows a disciplined capital-recycling strategy, through which it disposes of non-core assets and redeploys the proceeds in premium asset acquisitions and accretive development projects. In July 2024, the company sold the 50-bed Arizona General Hospital in Mesa, AZ and seven freestanding emergency departments to Dignity Health for $160 million. This sale resulted in a gain on real estate of approximately $85 million and an approximately $20 million write-off of straight-line rent receivables.
The consensus estimate for straight-line rent is estimated at $40.5 million, implying a rise from $38.4 million reported in the prior quarter and $21.5 million in the year-ago period.
Medical Properties opted for more than $2.5 billion in liquidity transactions from the beginning of the year through Aug. 6, 2024. The move was aimed at strengthening its balance sheet position.
MPW’s Price Performance & Valuation
Shares of Medical Properties have gained 0.6% over the past three months. This compared with the Zacks REIT and Equity Trust - Other industry’s growth of 4.9% and the S&P 500 composite’s rise of 11.2% over the same time frame.
Its industry peers like Ventas VTR and Healthpeak Properties DOC has also left Medical Properties in the dust, with these stocks having gained 10% and 5.7%, respectively, in the same period.
Three-Months Price Performance
Image Source: Zacks Investment Research
The stock is trading at a forward 12-month price-to-FFO of 5.77X, significantly below the industry average of 16.40X. Its forward 12-month price-to-FFO is ahead of its median of 4.27X and close to its one-year high of 7.46X.
Forward 12 Month Price-to-FFO (P/FFO) Ratio
Image Source: Zacks Investment Research
How to Play MPW Stock?
Medical Properties has recently been the subject of allegations made by short-sellers. However, in October 2024, the company’s board released the findings of an independent investigation that revealed no improper practices or management misconduct. Earlier, the company terminated its relationship with the Steward Health Care System, thereby enabling the immediate transition of operations at 15 hospitals in the country.
Moreover, exposure to certain troubled operators and high interest expenses remain concerns. Analysts’ southward revision of FFO estimates echoes similar sentiments.
Although Medical Properties’ stock is currently trading at a discount compared to its industry peers, this valuation disparity might not be as favorable as it seems. The lower price could be indicative of underlying issues rather than representing a clear investment opportunity.
Hence, new investors may want to steer clear of this stock for the time being. Those eyeing the stock may wait for a better entry point as the company works through its troubled operator concentration. However, its existing investors who have held MPW for an extended period may consider locking in profits at this point, as the company's third-quarter 2024 challenges discussed earlier are worrisome.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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